California Court of Appeal: Class Action Should Have Been Certified

After the California Supreme Court's decision in Sav-On Drug Stores v. Superior Court, a trial court's decision on class certification should not be disturbed if (1) the trial court applies the correct legal standard and (2) substantial evidence supports the trial court's findings regarding the factors supporting class certification. In Aguiar v. Cintas Corp. No. 2, the Court of Appeal recited this "abuse of discretion" standard of review, and then proceeded to hold the trial court did not decide the certification question correctly.

The plaintiffs accused Cintas of violating Los Angeles County's Living Wage Ordinance by failing to provide the class with the legally mandated pay and benefits. Cintas argued that the case was not amenable to class certification because the plaintiffs were inadequate representatives, common issues did not predominate over individual ones, and class procedures would not be superior to other means of recovering. These are all proper factors for a trial court to consider under the legal framework for deciding class certification issues.

So, was it that substantial evidence did not support the trial court's finding? Hard to say. It appears the Court simply disagreed with the class certification order and decided it the other way. This is precisely what the Court of Appeal did in Sav-On, which is why the Supreme Court imposed the deferential standard of review.

The appellate court in Cintas decided that the trial court should have divided up the putative class into sub-classes, which would have ameliorated the commonality concerns. The court also held that class actions would be superior to individual actions for this type of case.

This case involves an allegation of a failure to apply a relatively simple law properly to a large group. Therefore, the common facts may well be more prevalent than in a more fact-intensive case such as involving exemptions from overtime.

DGV

Statute of Limitations for Vacation Claims

In California, by statute, all accrued, unused, vacation must be paid at the time of termination of employment. Long-term employees may have been accruing vacation for years. What happens when an employer fails to pay out vacation that accrued long ago? Does the statute of limitations bar recovery? The state Division of Labor Standards Enforcement and a court opinion previously answered that question, "yes." But in Church v. Jamison, a different Court of Appeal decided that the statute of limitations for unpaid vacation does not accrue until the termination date, and that all unused vacation pay earned may be the subject of a timely lawsuit.

The court also decided that claims for unpaid wages were subject to the statute of limitations for oral contracts (two years), rather than the three-year statute applicable to statutory claims. This holding likely will not apply to overtime claims, because overtime is a creature of statute. The obligation to pay (base) wages, on the other hand, arises from the "contract" to perform services in exchange for pay.

Finally, the court held that business expense reimbursement claims under Labor Code section 2802 arise as the employee incurs the expense, and that a three-year statute of limitations applies. This means that employees who do not submit expenses for reimbursement within three years of incurring them would be barred from recovery, even if the employees have not yet been terminated. Some of you know people who might wait three years to turn in an expense report.

DGV

Court Cancels "Groundhog Day" for Serial Wage and Hour Class Actions

May Department Stores has been the subject of successive wage and hour class actions. The company defeated class certification in at least two cases and prevailed on appeal as well.

Yet, the plaintiff's lawyer was undeterred and filed yet another class action in Alvarez v. May Department Stores Co., this one venued in L.A. As with the prior cases, Alvarez challenged the exempt status of assistant managers.

The L.A. Superior Court sustained a demurrer to the complaint. The court held that the class action allegations were barred by the doctrines of "collateral estoppel" aka "issue preclusion." Huh?

Collateral estoppel is a doctrine which prevents relitigation of issues
previously argued and resolved in a prior proceeding. . . . In order to apply this principle: (1) the issue must be identical to that decided in the prior proceeding; (2) the issue must have been actually litigated in the prior proceeding; (3) the issue
must have been necessarily decided in the prior proceeding; (4) the decision must have been final and on the merits; and (5) preclusion must be sought against a person who was a party or in privity with a party to the prior
proceeding.

Ohh.

So, Alvarez's lawyer appealed, arguing that collateral estoppel cannot preclude a later class action. Rather, Alvarez said at oral argument that he could continue to litigation class certification in new lawsuits until it was no longer "economically feasible" to do so.

Well, the Court of Appeal in Alvarez v. May Department Stores decided enough was enough and affirmed the trial court, barring re-litigation of the certification question. So, employers who defeat motions for class certification likely will not have to face endless "me-too" lawsuits on the same issue. It is unclear from this opinion whether collateral estoppel would apply no matter how much time has passed between the old lawsuit and the new one. Stay tuned.

DGV

UPS's Safety Standard Violates ADA

UPS operates nearly 6,000 vehicles with a gross vehicle weight of under 10,000 lbs. Those trucks are not subject to US Department of Transportation safety standards. Yet, UPS required drivers of those vehicles to pass the DOT's physical requirements. These include a hearing test. A class of hearing impaired applicants challenged these standards under the ADA.

The Ninth Circuit, in Bates v. UPS, held that UPS's job requirement violated the ADA. UPS' primary argument was that the employees were not "qualified" because they could not perform the essential functions of the job (including hearing at the level mandated by the DOT) "safely" with or without accommodation.

The court rejected the normal "McDonnell Douglas" burden-shifting analysis, saying that when an employer takes disability into account when making a decision, it is unnecessary to use that analysis. The court analyzed whether UPS engaged in "discrimination" under the ADA by using a qualification standard that screens out people with disabilities - here, the hearing impaired. The hearing test of course did screen out the hearing impaired. UPS argued that the plaintiffs could proceed only if the proved that the hearing test screened out applicants who could drive "safely," an essential job function. But the court said that the burden was on UPS to show the contrary.

That left UPS with the burden of proving "business necessity" and "job-relatedness" as an affirmative defense. On that point, the court decided UPS had to prove one of two things to uphold UPS's blanket exclusion: (1) "all" deaf drivers would drive substantially less safely than the "hearing" drivers or (2) it would be impossible to prove whether that was true. The court analyzed the extensive expert evidence submitted and agreed with the district court that the findings were inconclusive. Thus, UPS would have to exclude drivers on a case by case basis rather than categorically reject all drivers having a certain level of hearing impairment or greater.

This case will affect employers who use medical examinations to screen out groups of employees who do not meet the given criteria. The employer will be foreclosed from arguing the employee is not "qualified." Instead, the employer will have the burden of proving the exclusion was "job-related and based on business necessity," a high burden.

Still More Amendments to AB 1825 Regulations

On October 2, the Fair Employment and Housing Commission further revised the proposed harassment training regulations. In this round of revisions, the Commission primarily addressed "duplicate" training - e.g., when a supervisor is hired from another company and had AB 1825-compliant training at the former employer within two years. In such cases, the supervisor must receive, read, and acknowledge having read the new employer's anti-harassment policy. That supervisor must be trained again within two years of the prior training. The Commission also continues to wrestle with the interval between training, attempting to balance administrative convenience with the statutory mandate of training every two years.

DGV